2. How Are You Feeling as You Consider This Investment?

But you should, to the best of your ability, avoid making any big investment decisions when your emotions are running high.

So, as you consider any particular investment, ask yourself how you’re feeling. Are you scared? Exhilarated? Anxious? Confused?

The stronger your emotions, the better off you are sleeping on the decision and waiting until you can think with a calmer mind.

3. Do You Understand This Investment?

Never invest in anything you don’t understand.

Seriously. Just don’t.

The best investments are often the simplest. Many financial professionals would like you to believe otherwise, but complicated investments typically have higher costs, lower returns, and more unintended consequences.

Keep it simple. If you can’t explain how the investment works in a minute or less, you should walk away.

5. How Does It Fit in with Your Other Investments?

No investment decision should be made in isolation. No investment is “good” or “bad.” What matters is how it fits into your overall plan and how your entire portfolio of investments works together to help you reach your goals.

For example, your employer might offer you the opportunity to buy employer stock at a discount. That sounds like a no-brainer on the surface, but there are some other factors you need to consider:

What adjustments would you have to make to the rest of your portfolio to counterbalance those things?

Will those adjustments cost money? Are they logistically difficult? Are they even possible?

Your objective is not to pick a bunch of good investments. Your objective is to build a portfolio of investments that work together to help you achieve your goals.

An investment is only worthwhile if it fits within that portfolio.

6. How Easily Can You Get Out of This Investment?

Switching mutual funds within a 401(k) is easy. There are almost never any trading fees and there are no tax consequences, so getting out of a bad decision is simple and usually cost-free.

Getting out of an investment within a taxable brokerage account can be trickier. The logistics are usually simple, but there are often trading fees and taxes to consider.

Getting out of something like whole life insurance can be a nightmare. Unless you’re many years in you will almost certainly lose money on the investment, and even if you make money you’ll likely owe taxes and maybe even surrender fees.

You shouldn’t be making frequent changes to your investment strategy, but you don’t want to unnecessarily lock yourself into anything either. Before you put your money into any individual investment, you should ask whether you’re able to get out and how much it would cost you.

7. What Is the Expertise and/or Motivation of the Person Recommending This Investment?

Always, ALWAYS consider the source of every investment recommendation you get.

Is it a friend or family member? A random blogger? Does this person have any real expertise?

Is it a financial professional? If so, how are they paid? Do they have a financial incentive to make this recommendation?

Whoever it is, does this person have a detailed understanding of your personal goals and your overall financial situation? Do they know what investment accounts you have? Do they know what other investments you hold?

There are many people who are happy to make all kinds of investment recommendations. Very few are in a position make a good one.

8. Is There Any Need to Change Your Current Investment Strategy?

You chose your current investments for a reason, right? Have your reasons changed? Have your circumstances changed?

Is there any reason at all to change what you’re already doing?

If you made thoughtful decisions from the beginning, the answer is most likely no. Your current investment strategy is almost certainly good enough, and there’s really no need to consider something new.

Warren Buffett is famous for saying that “Lethargy bordering on sloth remains the cornerstone of our investment style.”

Matt Becker, CFP® is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents take control of their money so they can take care of their families. His free book, The New Family Financial Road Map, guides parents through the all most important financial decisions that come with starting a family.